Berkshire’s Hidden $8 Billion Earnings Explained & Key Risk

Berkshire is a terrific service and I do not think Buffett's age is a threat given that the businesses are all doing business without Buffett now. Over the long-term there could be some capital allotment difficulties however he likely advised his supervisors well and the goal is not eye-popping efficiency as he recently shared in his letter. But, there is a significant risk when investing.

BRK Letter And Outcomes

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Berkshire's Hidden $8 Billion Earnings Explained & Key Risk

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  1. I don’t doubt that it will remain a very profitable business BUT the market simply isn’t purely rational. When the man dies, the cultural capital that is has is going to be severely damaged. The price WILL go WAY DOWN!!!

    1. I would guess the price will rise as the uncertaintitly of WB’s age will be removed. Hopefully the culture WB has put into BRK will mean it contiunes to thrive. For example Standard Oil made people rich for 100 years and nobody knows or cares who the second chairman was after Rockfellow’s retired.

    2. I’m not super sure it will. Apart from Apple, he hasnt really properly handled the portifolio very well the last few years. Hes 90. Time to switch was last decade I think.

    3. If the “new buffets” in Berkshire are those who jumped In and out from Verizon and TSMC, not sure the future will be as bright as with Buffet around…

    4. Such emotional moves in the market are extremely temporary though. I assume buffet and co have done serious succession planning considering they have a trillion dollar business with a 100 year old man at the head who any day now is going to shut off and not turn back on. I think it will would be bought right up after the drop. The real danger is if the succession planning puts someone inadequate in his place who just destroys the business itself.

  2. 6:23 I don’t see a world where BRK hits $384 billion market cap, you don’t take into account the $167bn usd on the balance sheet so at a minimum $551bn worst case. Also, comparing 2019 earnings to 2023 is difficult because we’ve had at least 20% of inflation in 4 years. Otherwise good video! I hope I don’t sound like a hater because I like the channel, I’m just giving my thoughts

  3. Is this analysis correct? P/E for privately owned BH businesses is around 12. Because if you would from market cap (885B) remove cash (165B) and portfolio value (355B) and divide that with operating earnings excluding dividends (around 5B) and excluding Earnings of OXY KHC DVA (2B) – 30B- you get PE of around 12.

    1. Thanks for the video. I am not sure how BRK gets to a market cap of $384 billion with $167 billion in cash. I think Uncle Warren or Cousin Greg will be buying stock hand over fist. I think you have done several videos on the Inelastic Market Hypothesis.

  4. HI Sven, a question on the accounting side : berkshire reports operating earnings (which is different from net income / loss because of interest / taxes etc…) but you are adding to Berkshire’s operating earnings NET earings of the Berkshire investments; in other words your sum is not like for like it seems to me . Perhaps you should start from Berkhiser net earngins, add-back the market to market valuations of Berkshire investment and then add what you call Berkshire hidden earngin. Bottom line = it seems to me you are over-estimating Berkshire earning power

  5. People need to stop looking at PE ratio of conglomerates like BH that has underlying public stock holdings. Because it makes no sense. The accounting rule says you need to report unrealized gain/loss from stock investments in the report. In that case, their PE ratio could be negative because they are sitting on unrealized losses (as it happened in 2022). Instead, Warren Buffett always says to look at operating income. I only look at BH’s book value and P/FCF ratio, PE ratio is irrelevant.

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